Finance charges on capital improvements? - Posted by Rolfe Kurtyka

Real Estate Investing
#1

Posted by Nate on February 22, 2001 at 10:59:18:

No, the finance charges would be considered interest expenditures, not capital expenditures.

However, if you are flipping a property (buying as a dealer for resale, with no intention of holding it long term), I would assume that your taxable profit would be calculated as selling price less ALL expenses (including interest etc.) If you’re not holding the property long term and have no intent to claim any depreciation, whether something is a capital improvement (vs an expense) is not material.

I am not an accountant, so no guarantees this is correct. Just my layman’s interpretation.

Nate

#2

Finance charges on capital improvements? - Posted by Rolfe Kurtyka

Posted by Rolfe Kurtyka on February 22, 2001 at 10:50:42:

Technical accounting question;

Assuming a purchase at a supplier is booked as a capital improvement for a specific project, if the vender provides a revolving credit account, how are the finance charges treated?

Do I enter only the initial purchase amount, or include any/all finance charges? What if, upon sale or refiance of the property, I do not immediately pay off the account, and carry finance charges–would the finance charges then be considered cap expenditures or ?

Thanks, Rolfe